Medical Marijuana, Meet E-Commerce

By
Geoff Williams, CNN
on January 12, 2010

Entrepreneur John Lee thinks the pot business is ready for its own Amazon.com.

The numbers back him up. Marijuana is California’s biggest cash crop, generating sales estimated at $14 billion a year. Thanks to the state’s increasingly liberal medical marijuana laws, more of that money than ever before is being spent legally.

Enter PlainView Systems, a four-month-old Sonoma startup that aims to bring sophisticated business management tools to an industry that has only recently begun operating like one. “It’s a business where everyone is very, very paranoid,” Lee says.

PlainView’s “compassionate care marketplace” is a business-to-business exchange for licensed providers of medical marijuana and their patients. Participants can band together to form growing collectives — a legal requirement for those that want to sell pot — and cut deals with other members to buy and sell their inventory. The system also helps users sellers keep their records in order, generating invoices, sales reports and tax paperwork.

Evan, who asked that his last name not be used, is one of the site’s early clients. Now 23, he’s been growing cannabis and supplying it to a dispensary since he was 18 — when it became legal for him to do so, he is very careful to say. He uses PlainView to invoice his buyers and order seeds and fertilizer for his crop.

“I’m just a small-time grower,” Evan says. “Anytime I have extra, I can sell it to [a dispensary]for $2,000 to $4,000.”

Actually, even the word “selling” is a legal no-no with the dispensary that Evan works with. “They’re ‘reimbursing you for your time,’ that’s how they like you to say it,” he says.

That semantic footsie is a sign of how California is approaching its controversial crawl toward de facto pot legalization: By burying it in red tape. Local municipalities have drawn up a thicket of regulations specifying how, and how much, cannabis each individual merchant can grow, transport and sell. For Lee, that blizzard of bureaucracy is a business opportunity. It means sellers will need help keeping their paperwork straight.

“Just in the state of California alone, according to my calculations, medical cannabis is a $200 million market,” Lee estimates. “As that market grows, we want to have a small but significant part of.”

But the formerly underground industry isn’t exactly scrambling to shape up and fly straight. Four California dispensaries didn’t return calls and e-mails seeking comment on PlainView Systems’ business model.

“A lot of them are still on the edge of the law and may not want the publicity,” theorizes Andy Cookston, who owns Cannabis Medical, a clinic in Denver that grows and dispenses its own marijuana on the premises.

Cookston says that he appreciates Lee’s “idealism.” If PlanView Systems does ultimately help growers and dispensaries operate within the law, “I’m all for that,” he says. “His business makes great sense.”

Lee never expected to work in the drug trade. A lifelong IT professional, he held an executive position at media software maker Real Networks before losing his job to a layoff in February. Soon after, Lee’s brother saw a news story on CNBC about California’s growing medical cannabis industry and called up to suggest it as a career option. “And I thought, ‘OK, I’ll go take a look,'” Lee says.

He didn’t want to start a dispensary and knew cannabis farming wasn’t in his future. But his quarter-century of experience in technology seemed like a useful fit for the fast-growing field.

Fourteen states have legalized some form of medical marijuana, and new signs of acceptance turn up almost daily. The American Medical Association recently softened its stance on the drug, recommending that some federal controls on it be relaxed, and the Obama administration reversed a Bush era policy and said it would stop federally prosecuting medical marijuana users and suppliers who comply with their state laws. Every step creates more potential clients for PlainView.